Hotels in Dubai enjoy some of the highest occupancy rates in the world. Tourists flock from around the region and afar to bask in the emirate’s winter sun, lie on its beaches and attend its glitzy events.

Dubai has greater ambitions too. It wants to receive some 25 million visitors in 2020 – when it hosts the World Expo. That figure will be up from 9.9 million last year, according to the Mastercard Top Destination Cities index, and is more than the combined visitors last year to New York and Paris.

To meet the government forecasts and cater for the current buoyant demand, developers are looking to build many more hotels in the emirate.

Currently, Dubai’s hotel and hospitality sector is in great health. It has an occupancy rate of about 80%, compared to a region-wide average of 64% and a European average of 56%, according to STR global.

“2020 is just five years away,” said Chiheb Ben Mamoud, head of hotels and hospitality at JLL Middle East and Africa. “Hence, the target of doubling the capacity is ambitious but the current pipeline should help.”

JLL estimates that there are 61,150 hotel rooms in Dubai currently. The total pipeline includes 20,000 keys and last week Nakheel, the developer behind the man-made island of Palm Jumeirah that is home to some luxury resorts such as the Atlantis, released plots for up to 23,000 rooms to be built on its Deira Islands reclaimed land project.

That’s a 70% increase in the number of hotel rooms, before even considering a few other major developments. These include Mohammed Bin Rashid City, which was announced as a master development with some 100 hotels, and Dubai World Central, where the new airport is based and Emirates Airline will likely shift to. It is also expected to see some significant hotel development, and then there’s the Expo 2020 site itself.

The eagerness to meet demand mirrors commercial real estate in 2007 in Dubai. Back then, office vacancy rates across the emirate were less than 5%, making it very difficult to find a spot for pens and paper clips. That led to a flurry of commercial development and a lack of oversight has now left the vacancy rate languishing at about 45%, according to JLL.

The dynamics of the hotel space are different to commercial real estate. Dubai’s current high office vacancy is also as much a consequence of the way office space was sold off in small chunks to investors as it is over-zealous developers.

But could we see a hangover from Expo 2020 in the hotels space?

So far, Nakheel Chairman Ali Rashid Lootah is not too worried there will be oversupply, and is instead hoping to target a lower end of the market for which Dubai has traditionally not catered. “It’s more towards the three to four star visitors,” he said.

But others are less bullish on the prospects post 2020, unless Dubai can sustain the level of visitors expected for the event.

“If tourist arrivals fall back following the end of the Expo, as we fear is likely, the Emirate could find itself facing an over-supply of hotel rooms, office space and transport infrastructure,” an analyst at London-based Capital Economics said.

Comments (2 of 2)

As you are not aware of any Travel and Tourism trends and the impact this has on Hotel supply nor have any knowledge of what is happening outside your own back yard. Keep your stupid comments to your self.